A recent report from the Pakistan authority reveals that the government will adopt restrictive measures for crypto assets. The announcement was issued when the country’s rupee value experienced a sudden decline due to current macroeconomic pressure.
On May 17, the Pakistan Minister of State for Finance and Revenue, Aisha Ghaus Pasha, revealed that the Asia country abandoned plans to legalize cryptocurrencies. Citing the existing Financial Action Task Force (FATF) policies, Pasha observed that the regulatory agency had imposed restrictive measures to minimize the involvement of universal policymakers dubbed “Grey List.”
Pakistan Fails to Legalize Crypto
Following the FATF announcement, the regulators observed that the authority violated the imposed crypto regulation, which obliged them to reconsider its stance on digital assets.
Reflecting on Minister Pasha’s announcement, the Pakistan authority has tasked the country’s apex bank, the Ministry of information technology, and the State Bank of Pakistan (SBP) to support the government in enforcing the crypto ban.
In a separate writing, the SBP announced plans to restrict the use of crypto as a new financial technology. Elsewhere, a person privy to the information revealed that local banks in Pakistan had warned the customer from buying and selling crypto since it was considered illegal.
A statement from a local bank in Pakistan outlined the regulatory instructions provided by SBP regarding crypto transactions. The report stated that all foreign exchange transacted through various online payment methods are considered risky and illegal.
The SBP statement mirrors an official report from banks captured by the Pakistan Dawn Newspaper. This report warned the customer from buying and selling cryptos using either debit or a credit card.
In the newspaper briefing, the Dawn reporters noted that despite the unfriendly crypto environment, the country has a rising crypto-savvy population.
Factors Contributing to High Adoption of Cryptos in Pakistan
Per the general manager at Rain Financial, Zeeshan Ahmed, crypto activities in the country completed using Pakistan-based digital wallets generated a revenue of $25 million in 2023. Ahmed noted that the income from crypto transactions had increased from $18 million to around $20 million in one year.
Notably, the report from Minister Pasha was conveyed when the country was experiencing political instability. A few days ago, the former prime minister Imran Khan was subjected to legal action after being charged with corruption.
After probing the matter, the supreme court ordered the release of prime minister Khan. The judge preceding Khan’s case considered the arrest illegal since it also caused massive protests in Pakistan.
Besides the political turmoil, the Pakistan Rupee dropped by 3.3% to reach its all-time low. The decrease in Pakistan’s local currency value was due to the greenback effect, which trades $1 at 300 rupees.
Key Factors Contributing to the Devaluing of the Pakistan Rupee
Consequently, Pakistan’s unfavorable political and financial condition compels retailers to plow their salaries into acquiring stablecoins. A report from the Chair of KTrade, Ali Farid Khwaja, illustrated that most Pakistanis were concerned over the sovereign default after the government failed to secure the required funding from the International Monetary Fund (IMF).
Kwaja argued that most stablecoins are purchased to expose to the US currency. In comparison to the Pakistan Rupee, Kwaja noted that Bitcoin outshined the local currency. According to Bilal Bin Saqid, the famous blockchain investor, the Pakistan Rupee had plummeted by 57.4% over the dollar value for one year.
Saqid confessed that the decrease in rupee value had positioned stablecoin as the most efficient and convenient method to access the US dollar. He added that the current import restriction in Pakistan had limited the exposure to US currency.
Reportedly in the previous bull run, over 20 million Pakistan created accounts on the crypto platform. Besides the restrictive measures adopted by Pakistan, the authority signed a new bill for Electronic money institutions (EMIs) in 2022. The new bill aimed to expedite the country’s CBDC launch to ensure the digital fiat would be launched in 2025.